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Заголовок Inflation May Be About to Pick Up Sharply
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Inflation• Экономика » Финансы » Инфляция

• Экономика » Макроэкономика » Макроэкономические Индикаторы » Инфляция
May Be About to Pick Up Sharply

Inflation• Экономика » Финансы » Инфляция

• Экономика » Макроэкономика » Макроэкономические Индикаторы » Инфляция
May Be About to Pick Up Sharply

Avoiding longer-dated government and corporate debt and keeping to the very
short end seems sensible.

By

Richard Cookson

November 21, 2020, 1:00 AM EST

4:43

Inflation• Экономика » Финансы » Инфляция

• Экономика » Макроэкономика » Макроэкономические Индикаторы » Инфляция
May Be About to Pick Up Sharply

Avoiding longer-dated government and corporate debt and keeping to the very
short end seems sensible.

By

Richard Cookson

,

November 21, 2020, 1:00 AM EST

Chinese export prices are rising. Photographer: Barcroft Media/Barcroft Media

Richard Cookson was head of research and fund manager at Rubicon Fund
Management. He was previously chief investment officer at Citi Private Bank
and head of asset-allocation research at HSBC.

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Chinese export prices are rising.

Photographer: Barcroft Media/Barcroft Media

Photographer: Barcroft Media/Barcroft Media

It may seem strange to be worried about inflation• Экономика » Финансы » Инфляция

• Экономика » Макроэкономика » Макроэкономические Индикаторы » Инфляция
in the midst of a global
recession, a pandemic• Медицина » Эпидемиология » Пандемия and huge political ructions in the U.S• Соединённые Штаты Америки., but I strongly
suspect that it’s about to pick up both soon and sharply. How fast this
happens depends on how quickly the developed world recovers over the next few
months, but pressures are building. As has been the case for many years,
global inflation• Экономика » Финансы » Инфляция

• Экономика » Макроэкономика » Макроэкономические Индикаторы » Инфляция
has “Made in Asia” stamped all over it . This
time, though, that’s likely to be compounded by much greater supply
constraints in the economy.

First, a little humility. Forecasting inflation• Экономика » Финансы » Инфляция

• Экономика » Макроэкономика » Макроэкономические Индикаторы » Инфляция
is fiendishly hard. Generally,
the best forecast is what inflation• Экономика » Финансы » Инфляция

• Экономика » Макроэкономика » Макроэкономические Индикаторы » Инфляция
is at the moment. Central banks have been
neither good at forecasting inflation• Экономика » Финансы » Инфляция

• Экономика » Макроэкономика » Макроэкономические Индикаторы » Инфляция
nor creating it. This is because, in
essence• Философия » Философские направления и школы » Гегельянство » Бытие » Сущность, classical economics largely assumes that, all things being• Философия » Философские направления и школы » Гегельянство » Бытие equal,
increasing the supply of money pushes inflation• Экономика » Финансы » Инфляция

• Экономика » Макроэкономика » Макроэкономические Индикаторы » Инфляция
higher. And yet, after years
of rate cutting, quantitative easing and so forth, the only thing that has
gone up is asset prices. It has been Apple Inc• Объект организация » Организации по алфавиту » Организации на Ap » Apple Inc.., as it were, not apples.

Clearly, then, not all things are equal. Economic models assumed that how
quickly money changes hands (its velocity, in the jargon) is both stable and
predictable. Instead, it has collapsed. That’s why all those people who
predicted a massive rise in inflation• Экономика » Финансы » Инфляция

• Экономика » Макроэкономика » Макроэкономические Индикаторы » Инфляция
as a result of central bank QE have been
wrong. Velocity may pick up — your guess is as good as
mine — but that wouldn’t tell us much about what happens in
the next couple of years as it’s more of a long-term indicator. And
there are signs aplenty that inflation• Экономика » Финансы » Инфляция

• Экономика » Макроэкономика » Макроэкономические Индикаторы » Инфляция
is headed higher.

Ask yourself the following counterfactual. Had you known that the
developed-world economy would be largely shut down, what would you have
expected to happen to the prices of traded goods? Probably, you’d have
expected them to collapse. But as the chart below shows, they didn’t
even fall as much as in the manufacturing recession of 2015, let alone during
the global financial crisis• Финансовый кризис.

Holding Up

Trade prices are astonishingly strong in the face of a global pandemic• Медицина » Эпидемиология » Пандемия

Source: CPB via Bloomberg• Объект бренды » Бренды на b » Bloomberg

Prices are now rising strongly, in part because Asian growth is humming.
Chinese export prices have risen year over year. Excluding oil, industrial
commodity prices are also now higher than they were at the end of last year.
Even if nothing moves between now and late spring of 2021, year-over-year
comparisons will start to look very dramatic — as prices this spring
were at their low point. These trends are already making themselves felt in
the developed world. U.S• Соединённые Штаты Америкиimport prices, for example, are rising
strongly. Durable goods prices are on a tear. There are signs that services
inflation• Экономика » Финансы » Инфляция

• Экономика » Макроэкономика » Макроэкономические Индикаторы » Инфляция
is also rising.

Renewed Demand

U.S• Соединённые Штаты Америки. import prices are up sharply

Source: Bloomberg• Объект бренды » Бренды на b » Bloomberg

More from

The Past Isn’t Past for Moscow and Beijing

The Chinese Antidote to a Covid• Медицина » Эпидемиология » Инфекционные заболевания » Вирусология » Вирусы » Коронавирусы

• Медицина » Заболевания » Инфекционные заболевания » Вирусология » Вирусы » Коронавирусы
-battered Philippines

This Mnuchin-Powell Beef Comes at the Worst Time

Warren Buffett Saw This Home Depot• Объект организация » Организации по алфавиту » Организации на Ho » Home Depot Deal Coming

Yet much of the developed world is still in the midst of a pandemic• Медицина » Эпидемиология » Пандемия, subduing
demand. When the vaccine comes or the virus blows itself out, demand will pick
up
smartly. What will happen to prices when it does? I strongly suspect that a
lot of manufacturing capacity has been lost. Both domestically and
internationally, transportation is at once more difficult and more expensive.
The vogue for ESG investments has probably also meant a lack of investment in
stuff you dig out of the ground or drop on your foot.

Assuming that all this takes a fairly long time to get up and running, you
would expect these constraints to last. The same is probably true of services.
A lot of companies have already been put out of business and many more are
likely to go to the wall. There has been, then, severe losses to
economies’ supply potential. All of which means that the path of least
resistance when demand picks up is higher prices.

How central banks react is key. They have told us that they will let economies
run hot. What they’re really saying is that nothing they’ve done
has made the slightest difference to overall inflation• Экономика » Финансы » Инфляция

• Экономика » Макроэкономика » Макроэкономические Индикаторы » Инфляция
and they don’t
know why. Still, let’s take them at their word. What would it mean in
practice? Would they avoid putting up short rates or try to hold down long
rates at a time when government borrowing is likely to remain huge? Either
would, in effect, loosen monetary policy by driving real rates down when
economies — and inflation• Экономика » Финансы » Инфляция

• Экономика » Макроэкономика » Макроэкономические Индикаторы » Инфляция
are growing strongly. This is not
credible and countries that do nothing would probably see their currencies
fall instead, thereby pushing imported inflation• Экономика » Финансы » Инфляция

• Экономика » Макроэкономика » Макроэкономические Индикаторы » Инфляция
higher.

I suspect that private holders of longer-dated bonds won’t wait for
central banks to change their minds, knowing that they’ll have to hike
at some point. The risk is asymmetric. Bond yields are breathtakingly low and
sooner or later they will rise, possibly rapidly: There is a lot of leverage
in fixed income, and bonds with de minimis coupons potentially move a lot more
in price than those that actually pay a decent rate of interest.

Those with a few grey hairs will remember the bond carnage of 1994. At some
point, I’d expect yield curves to steepen dramatically from
today’s levels. Avoiding longer-dated government and corporate debt and
keeping to the very short end seems sensible. As would buying
out-of-the-money, long-dated put options on long-dated debt.

Central banks have suppressed volatility and rates in debt markets for years.
This is about to become much harder. 

This column does not necessarily reflect the opinion of the editorial board or
Bloomberg LP and its owners.

To contact the author of this story:

Richard Cookson at racookson@gmail.com

To contact the editor responsible for this story:

James Boxell at jboxell@bloomberg• Объект бренды » Бренды на b » Bloomberg.net

Published on November 21, 2020, 1:00 AM EST

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